Brexit – the final countdown (or is it?)

11 March 2019

The UK is leaving the EU in two and a half weeks’ time, at the time of writing. Or maybe it isn’t. Your guess is as good as ours.

Parliament is preparing to vote (again) on whether to say “yes” to Theresa May’s deal, with or without some revisions to the Irish Backstop. Then, if Parliament says “no”, it will vote on whether to leave with no deal or ask the EU for extra time. Now seems a good time to recap on where exactly we are and what it all might mean from an employment law perspective.

Where we are now - “no deal”

The European Union (Withdrawal) Act 2018 (“the 2018 Act”)was passed on 26 June last year and provides the legal basis for a “no-deal” Brexit. As things stand, the UK will leave the EU at 11pm on 29March without a deal. Unless Parliament passes fresh legislation changing that position, it is what will happen. The 2018 Act ensures that EU-derived domestic laws such as the Working Time Regulations and TUPE will carry on as part of UK law, as too will direct EU legislation such as the General Data Protection Regulation.

The 2018 Act also makes provision with regard to the supremacy of EU law and what will happen to the substantial body of case law of the European Court of Justice (“ECJ”). It is here that, if there is no deal, Brexit will begin to have an incremental effect on UK employment law from the moment the courts and tribunals open their doors to the public on Monday 1 April 2019.

While lesser bodies such as the Employment Tribunal (“ET”) will still be obliged to follow pre-Brexit ECJ judgments, the Supreme Court and the High Court when sitting as a court of appeal will not. As for any new ECJ decisions, even ETs won’t have to follow them, although they can “have regard to” them “so far as… relevant to any matter before the… tribunal”. Additionally, the UK would not be required to follow any new EU employment directives, such as the Transparent and Predictable Working Conditions Directive or the Work Life Balance Directive, subject to “Commons locks” (discussed below).

The Government has, in the employment field and many others, been beavering away on the secondary legislation needed to try to make a no-deal Brexit “work” from a legal perspective. The Employment Rights (Amendment) (EU Exit) Regulations 2019, currently before Parliament, tidy up various pieces of UK employment legislation - for example, by scrapping the procedure by which ETs can make referrals to the ECJ, and attempting to preserve the existence of UK-headquartered European Works Councils (although we don't think this really works).

For many employers, the most pressing practical concern is the status of EEA nationals in their workforce. The position of anyone in the UK before 29 March is comparatively straightforward – they can apply for settled status using the Government’s app (they will need an Android phone) and stay. For anyone arriving after that date, it’s more complicated. The Government has said that EU nationals will still be able to arrive and work, and employers will be able to employ them having done normal (passport/national insurance) document checks. But to stay for longer than three months, they will need to apply for the new European Temporary Leave to Remain scheme, securing permission to stay in the UK for up to three years. After that, they will be covered by the new skills-based immigration system (see further below).

Where we might head next - a deal and a Withdrawal Agreement

When we reported on the proposed Withdrawal Agreement last December, we did not expect we would still be discussing it as a mere “possibility” by this time. Ifit is passed – and that’s a very big “if” - draft legislation would immediately be placed before Parliament to amend the 2018 Act and provide for a “transition” or “implementation” period through to the end of 2020. The best way to think of this period is that the UK would effectively carry on as if it were a member of the EU – applying all new directives, continuing to refer cases to the ECJ and being bound by its decisions, and honouring free movement of workers – but without having a say in any of the laws. Employers could continue to employ EEA nationals in the same way as they do at present.

Even if the deal is voted through, a delay to Brexit seems highly likely - there simply would not be enough time left for the European Parliament to approve the Withdrawal Agreement and for all the legislation to be passed to implement it. This would most likely necessitate only a one or two-month delay and should be fairly straightforward to agree with the EU.

That would not be the case, however, if Parliament votes the deal down again this week. While the current expectation is that it would then go on to vote against a no-deal exit and instruct the Government to ask the EU for an extension, there is no guarantee that the EU would agree. Or it might attach strict conditions, such as any delay being either: very short, so as not to interfere with the European Parliament elections scheduled for 23 to 26 May; or very long (perhaps through to the end of 2020), to stop Brexit from continuing to derail the EU’s wish to focus on other priorities.

The Irish Backstop is, of course, the main sticking point in getting the Withdrawal Agreement through the UK Parliament. It provides that “until the future relationship becomes applicable”, a single customs territory comprising the UK and the EU would apply – without limitation in time. As a condition of the EU signing up to this, so-called “level playing field” conditions would mean that the whole of the UK in some cases, or just Northern Ireland in others, would stay subject to swathes of EU law until the permanent, longer-term relationship is agreed. These conditions include: “fundamental rights at work, occupational health and safety, fair working conditions and employment standards, information and consultation rights at company level, and restructuring”. In other words, until the Irish Backstop was terminated, the UK could not make any changes to any EU-derived employment laws.

Ironically, given the hard Brexiteers’ objections to the constraints placed on UK sovereignty by the backstop, the Government has sought to win support for the Withdrawal Agreement from wavering Labour MPs by promising a vote (a “Commons lock”) on whether the UK should adopt any new EU employment laws which may be passed in the future. The Government has suggested that the first two Directives subject to this promise could be the aforementioned Work Life Balance Directive and Transparent and Predictable Working Conditions Directive. It is difficult to see how this assurance adds up to much, given that:

under the Withdrawal Agreement, the UK would be obliged to adopt any new directives passed before 31 December 2020 in any event;

the Government has already signalled its support for many of the proposals in the Transparent and Predictable Working Conditions Directive in its Good Work Plan;

the Work Life Balance Directive adds little to the UK’s existing domestic framework on parental rights; and

Parliament would still have to approve any new EU standards for them to come into effect.

Where are we going in the long term?

If we knew the answer to this, we’d be down at Ladbrokes. Maybe we will not be going anywhere, if we somehow end up with a second referendum and a vote to remain in the EU…

But assuming we are going somewhere, the Political Declaration that accompanies the Withdrawal Agreement is the best indicator of where we may end up long term. This provides the basis on which the UK and the EU are meant to negotiate their long-term relationship, once the Withdrawal Agreement is in effect.

The Political Declaration includes a commitment to a “high standard” of workers’ rights, and “level playing field” conditions, under which the parties are to “consider the precise nature of commitments” they should enter into in relation to “social and employment standards…having regard to the scope and depth of the future relationship.”Reading between the lines, there would be a trade-off between the degree of market access the UK is granted and the degree to which it remains signed up to EU employment rights and protections.

What precisely this means in practice would only start to emerge as negotiations began in earnest over the next 18 months or so. There is every reason to suspect they would be just as fraught as those that have taken place to date over the Withdrawal Agreement, if not more so. In the meantime, the UK would take steps to put in place its new immigration system, intended to come into effect from 1 January 2021, which would apply to EEA nationals as well as all others.

The saga of Brexit is evidently a very long way from being over. There will be plenty more plot twists, and the only certain thing is continuing uncertainty.